Web 2.0 & Social Apps

We see Web 2.0 and Social Apps as simply the next generation of web applications that are leveraging the network effect of massive user participation. In fact, we believe that Web 2.0 is more about user participation than technology. The key to Social Apps being how one enables, facilitates and encourages user participation by creating engaging user experiences utilizing a combination of good design and the right tools.

Web 2.0 originated as a phrase by Tim O'Reilly in 2004 that refers to the second-generation of Web based communities and hosted services - such as social networking sites, wikis and folksonomies - that facilitate collaboration and sharing between users.

In the late 90's and through the early 2000s, almost every enterprise made an effort to create an internet presence. The sophistication of these sites varied from simple static brochure ware sites to more complex transaction sites and completely new businesses that did not have an analogous counterpart in the brick and mortar economy. The focus of all these sites was to encourage their customers to interact and transact electronically. Companies that successfully transformed their businesses by establishing an online beachhead in lieu of, or to complement, their brick and mortar operations were able to gain significant market share and lower their operating cost.

The new model of Web 2.0 builds on this idea of servicing the customers electronically. However, the big difference is in the philosophical approach to the customer interaction using Social Apps.

The big difference between Web 2.0 and the prior generation of web applications lies in its philosophical approach to the customer interaction. The focus now is not just to have them transact online, but to find innovative ways to engage and involve the users so that they are eager to participate in defining and improving the user experience.

By engaging users in the early phases of the product and services definition, invaluable feedback can be gathered which can be used to provide just the features and functions that are really needed and allow the offering to be fine tuned to create a compelling user experience. This new philosophy is very similar to the open source trend where communities of developers collaborate around product concepts and share code to build software products and applications that are very relevant, focused and robust. This new model of building web applications exploits the global trend of harnessing the wisdom and the collective intelligence of the crowd to improve the quality of the end product.

Providing the right set of features and functions, delivered through a user experience that is customized to its user base, can build incredible loyalty given that the users have a sense of shared ownership in the design of the product. This approach to taking products to market is much cheaper and faster than the traditional method of conducting surveys and eliciting feedback from focus groups. It provides a much broader reach and the creation of customer loyalty is priceless.

Applications that exemplify Web 2.0 and Social App attributes are blogs, wiki's, social networks, social bookmarking and tagging and "software as a service" (SaaS) applications. These are characterized by:

• being extremely user focused and allowing the users to be in control of the interaction
• have a heavy emphasis on users' ability to interact with each other and initiate discussions, share opinions, reviews, ratings etc.
• depend on having massive numbers of people connected and interacting in a decentralized and distributed fashion

These applications are generally open, non-exclusionary and light-weight, in that they either require no installation or occupy a very small footprint on a user's desktop, thus allowing them to be updated frequently with minimal deployment costs. Amazon is a great example of a company that has led the industry in terms of adopting Web 2.0 and Social technologies and using it as competitive advantage to build market share.

One of the most important aspects of Web 2.0 is its ability to create new business models, new social models and new technology models quickly and effectively. For example in the traditional space of lending, financial planning and investments, a variety of new business models have emerged leveraging the community and participation aspects of Web 2.0.

• Lending and Borrowing: Several firms like Prosper and Zopa offer community based loan and financing sites. Loans from lenders can be distributed between borrowers or divided among different lenders.
• Financial Planning and Management: Wesabe, NetworthIQ and Mint are some of the new startups that offer web based personal financing tools. These are tools that let users manage finance, loyalty programs, access your bank accounts, share your investment experiences and offer saving tips.
• Stocks & Investment Advice: Seeking Alpha and FeelingBullish are investment sites for tracking stocks, community discussion, managing portfolio, executing trades etc. These sites allow you to collaborate with other investors on investment information and gather valuable insights on stocks and investor sentiments.

These new models have taken root and are challenging the status quo. We believe that the principles embodied in Web 2.0 and the disruptive technologies that are defining the next generation of the internet, are literally reshaping the way companies will have to do business to get ahead of their competitors and thrive.

In our opinion currently there are three key emerging trends that can be leveraged to create a solid Web 2.0 presence in the market.

Interface:

Build a superior user experience enabled by Rich Internet Technologies

Assembly of Web parts:

Set up a platform for assembly enabled by service oriented architectures

Participation:

Build a set of tools for users to enable an architecture of participation

These three initial steps will go a long way in building a Web 2.0 presence. Those who act now stand to gain on an early mover advantage in the market.